Suryamani Financing Company Ltd. Vs ITO (ITAT Kolkata)
Kolkata ITAT Restricts Section 14A Disallowance from ₹5.75 Lakh to ₹59,793: Only Investments Actually Yielding Exempt Income to Be Considered
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal partly allowed the assessee’s appeal for Assessment Year 2010-11 concerning disallowance under section 14A read with Rule 8D of the Income-tax Rules, 1962. The Assessing Officer had restricted the computed disallowance to ₹5,75,293, being the total expenditure claimed by the assessee, and the Addl./JCIT(A) confirmed the addition. Before the Tribunal, the assessee submitted that only investments which yielded exempt income should be considered for computing the disallowance and relied upon Principal Commissioner of Income-tax Vs. REI Agro Ltd., Principal Commissioner of Income-tax Vs. Shalimar Pellet Feeds Ltd. and the coordinate Bench decision in CHNHB Health Insurance Co. Ltd. Vs. ACIT, Circle-6(1), Kolkata. The Tribunal considered the coordinate Bench decision and the principle stated therein that disallowance under section 14A read with Rule 8D is to relate to income which does not form part of total income and, for the relevant computation, the investments giving rise to such exempt income are to be considered. The assessee’s working restricted the relevant investment base to ₹1,19,58,683 and arrived at a disallowance of ₹59,793. The Tribunal accordingly directed the Assessing Officer to restrict the disallowance under clause (iii) of sub-rule (2) of Rule 8D only to investments which yielded exempt income and to verify the assessee’s working of ₹59,793, substituting that amount in place of ₹5,75,293 if verified. Ground No. 1 was therefore partly allowed, while the remaining grounds were treated as general and requiring no separate adjudication. The appeal was consequently partly allowed.
